Davis Says All Power Costs to Be Recovered

Billions of dollars that have been drained from the state treasury to buy electricity so far this year will be fully repaid by June 30, and taxpayers will wind up spending “not one penny” on the energy crisis, an optimistic Gov. Gray Davis pledged Friday.

“We will not only be paid off for all our expenses to date, we’ll have enough . . . to continue buying power through this year and hopefully through 2002,” Davis said in an interview with Times editors and reporters.

The governor admitted that Californians face an uncertain--and possibly treacherous--summer. Already, he said, state officials have begun consulting with law enforcement officials around the country to develop a plan for dealing with the blackouts that could become a part of daily life during hot spells.

But he was nevertheless upbeat about the financial package he has crafted to rescue the state’s big private utilities. And he was unusually salty in his denunciations of those he considers responsible for the power shortages and price surges that have wreaked havoc in the state’s newly deregulated electricity market.

Davis described the out-of-state power generators and marketers who have raised the price of electricity by hundreds of percentage points as “the biggest snakes on the planet Earth.”

He questioned what his predecessors in state leadership were thinking when they failed to plan for growth in electricity demand. But he saved most of his vituperation for the federal agency that has refused the state’s entreaties to place a cap on wholesale electricity prices.

“If you’re looking for a culprit, I’ll give you a culprit,” he said. “The culprit is the Federal Energy Regulatory Commission.” As far back as 1995, Davis charged, the commission was undermining California by overruling state agencies that were seeking permission to build more power plants.

“They’ve consistently turned a deaf ear to my pleas, Sen. [Dianne] Feinstein’s pleas, the pleas of the governors and representatives of Oregon and Washington,” he said. “So if there is a villain, it clearly is the Federal Energy Regulatory Commission.”

Davis said the state was forging ahead on its own to solve the crisis. Through a combination of an $850-million conservation plan and what the governor described as the fastest power plant construction program in California history, the state hopes to keep blackouts to a minimum this summer.

Asked what he would tell Californians who will be paying higher rates while suffering through outages, Davis said: “Look . . . we live in one of the best places on the planet at one of the most fortunate times. Virtually nobody alive had to go through the Holocaust, the Depression, any of the world wars. . . . In everyone’s life comes a little sun and a little rain. We have to just act like adults and work our way through this problem. That’s what I’d say.”

Blaming Others for the Crisis

Davis expressed frustration at the hand he has been dealt, repeatedly insisting that he had inherited the power problems, not created them.

At the time that deregulation was being considered by the Legislature in 1996, Davis was state controller. “I basically wasn’t asked to take a position and I didn’t take a position,” he said. “I didn’t give it much thought.”

Since January, the state has been forced to spend $5.2 billion buying power that Southern California Edison and Pacific Gas & Electric have been unable to afford.

A Davis-sponsored plan approved by the Legislature calls for the state to float bonds to repay the state and help finance the purchases. The bonds, in turn, would be repaid by utility ratepayers through their monthly bills.

The plan was based on the premise that the state would be able to stabilize, and eventually lower, the price of electricity by entering into long-term contracts with power suppliers. Those lower prices have yet to materialize.

On average, California has been burning through $50 million a day on electricity--and that number will soon go up to about $57 million, administration officials say, because of a federal regulatory decision last week. That decision requires the state to buy power on behalf of cash-poor utilities, regardless of price.

Despite the mind-numbing figures, Davis and his financial advisors insisted Friday that they have created a plan that will make the utilities self-supporting--and take taxpayers off the hook--by early 2003. Here’s how:

* A record $12.4 billion in bonds scheduled to be issued in June would not only repay the budget, but would cover future state purchases of electricity and help the utilities repay their debts.

* New, higher electricity rates would give California about $6 billion this year. That money, along with the portion of the bond money left over after repayment of the state’s debts, would be used to finance future state power purchases.

The rationale behind those estimates is nearly impossible to scrutinize, because Davis’ cadre of Wall Street advisors and utility experts has refused to make public the contract information on which the figures are based.

They have even kept the information from state Treasurer Phil Angelides--the elected official charged with implementing the bond deal that is the linchpin of the recovery plan.

In recent weeks, Angelides has made a series of public statements raising questions about the plan.

At the current rate that California is spending money on electricity, Angelides estimated, the bond issue will run out this fall--not, as Davis said, in 2002.

Davis and his advisors said Friday that Angelides did not understand the true status of California’s foray into the power business because the administration had not shared its numbers with him. Davis planned to share more information with Angelides in coming weeks as the bond deal grew nearer, they said. The state will also be required to disclose some information when its bonds are offered for sale.

Davis insisted Friday that he has crafted “a very well thought-through plan,” adding that it had been given the “Good Housekeeping Seal of Approval” by major Wall Street investment firms.

Davis complained that the energy crisis has diverted his attention from other pressing matters, and said that, since late December, he has spent a total of only 10 working hours dealing with issues other than energy.

“I realize I have to deal with it but it’s ridiculous,” Davis said. “I can’t deal with education, the environment, health care, nothing. That’s all I do.”

In other developments Friday:

* A key Davis aide, Communications Director Phil Trounstine, resigned his $113,000-a-year job “to spend more time with my family and pursue a variety of offers in strategic communications.”

Trounstine, a former newspaper political writer who has written many of Davis’ key speeches, had most recently been coordinating the governor’s energy conservation publicity campaign. The resignation will take effect at the end of the month.

* A state energy panel recommended Friday that AES Corp., a major power generator in California, should be forced to sell any electricity it makes from two now mothballed generators in Huntington Beach to the state in exchange for expedited review of the company’s operating permit.

The California Energy Commission’s licensing committee, which is overseeing the company’s pursuit of a fast-track permit, had previously stopped short of attaching such a condition to the project after being warned by commission lawyers that doing so would violate interstate commerce laws.

But in a revised decision, the committee found that without a sales provision guaranteeing that power will be sold to California, the state would be deprived of its ability to effectively respond to the energy crisis.

If adopted by the full energy commission, which is scheduled to consider AES’ permit request Wednesday in Sacramento, the sales requirement would set a precedent.

*

Times staff writer Christine Hanley contributed to this story.